The Stingy News Weekly (04/07/2013)
Stingy News Flash
Fairfax Annual Meeting
I'll be going to the Fairfax annual meeting this week. If you're dropping by, say hi!
New @ StingyInvestor
Jolt from the blue
"When you're enjoying your cup of coffee this weekend, download a copy of Francis Chou's annual report. It'll help you to become a better investor."
"There is a considerable body of research on relative strength price momentum but relatively little on absolute, time series momentum. In this paper, we explore the practical side of absolute momentum. We first explore its sole parameter - the formation, or look back, period. We then examine the reward, risk, and correlation characteristics of absolute momentum applied to stocks, bonds, and real assets. We finally apply absolute momentum to a 60-40 stock/bond portfolio and a simple risk parity portfolio. We show that absolute momentum can effectively identify regime change and add significant value as an easy to implement, rule-based approach with many potential uses as both a stand- alone program and trend following overlay."
What risk premium?
"I disagree with most mainline thinking on this issue in that I believe the risk premium is much lower than is commonly believed. Most academics think it's around 5% or so. I think the long-run premium is probably about 2%. Eric Falkenstein thinks it doesn't exist at all."
Housing and the never-ending recession
"They argue that the recession is far from over and that the lingering effects of the collapsed housing market will be felt for years to come."
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